A virtuous cycle

There’s a virtuous cycle in the market. Strong credit growth drives down volatility, while lower volatility keeps down risk spreads. And narrower spreads make credit conditions even easier. Yet all virtuous cycles turn vicious at some date. Prudent investors should protect themselves now against such an outcome. On Tuesday, the Vix Index - a forward-looking measure of volatility for US equities - fell to a 12-year low. At a reading of below 10, the Vix is around half its long-term average value...